Business between India-Russia - Reality Check

Since Ukraine revolution in February 2014 and subsequent sanctions on Russia by EU, USA, and their allies, much water has flown down the river Moskva and Ganga.

There was a sense that Russia will open up and there would be big business opportunities for India. So what is the state of trade and business between Russia and India?

India’s business environment and ranking also improved significantly due to the economic growth boosting and business friendly decisions taken by the government. Indian government’s “Make in India” initiative has also been successful in bringing foreign companies to introduce new technologies and manufacturing in India. Indian diamond firms now directly participate in sight holders auction held by Russian diamond mining firms thanks to the initiative taken by Indian PM and Russian President in last 4 years. Previously, Indian diamond firms had to buy raw diamonds from Russian mines also through auctions held in 3rd countries like Hong Kong, Dubai, Belgium, etc.

There has been slow but significant progress in trade and business between Indian and Russia. I have observed that many small and medium Russian companies have invested and established offices and facilities in India in last 4 years which was not the case before. There is a Russian company which manufactures niche technology for electronic automated door and widows systems “DoorHAN” which has opened its manufacturing unit in Mumbai, India. Then there is a Russian logistic technology company which is like “Uber/Ola of Courier logistic” has opened its office and operations in Mumbai, India. There has been lot of awareness and increasing interest about India’s economic growth stories and interest to do business with India is on the rise. Let me give you an example to explain this. I represent a leading Indian ferro alloys producer in Russia. Russian steel companies import large volumes of special ferro alloys used in steel making from Georgia, Ukraine and Europe apart from buying from domestic companies because of freight and logistic benefits which make importing costlier from India. But with sanctions on some Russian companies like “Rusal” and overall problems with Europe and Ukraine, I have recently started getting serious business enquiries for the same from Russian steel companies as Russian companies look for alternatives. There was a big international Ferro alloys conference in New Delhi during 1st week of September,2018 and for the first time it was attended by major Russian steel producers like Evraz, NLMK, etc.

Indian companies have also made big investment in recent times in oil and gas sector in Russia. ONGC, IOC and BPCL h

Since Ukraine revolution in February 2014 and subsequent sanctions on Russia by EU, USA, and their allies, much water has flown down the river Moskva and Ganga.

There was a sense that Russia will open up and there would be big business opportunities for India. So what is the state of trade and business between Russia and India?

India’s business environment and ranking also improved significantly due to the economic growth boosting and business friendly decisions taken by the government. Indian government’s “Make in India” initiative has also been successful in bringing foreign companies to introduce new technologies and manufacturing in India. Indian diamond firms now directly participate in sight holders auction held by Russian diamond mining firms thanks to the initiative taken by Indian PM and Russian President in last 4 years. Previously, Indian diamond firms had to buy raw diamonds from Russian mines also through auctions held in 3^rd countries like Hong Kong, Dubai, Belgium, etc.

There has been slow but significant progress in trade and business between Indian and Russia. I have observed that many small and medium Russian companies have invested and established offices and facilities in India in last 4 years which was not the case before. There is a Russian company which manufactures niche technology for electronic automated door and widows systems “DoorHAN” which has opened its manufacturing unit in Mumbai, India. Then there is a Russian logistic technology company which is like “Uber/Ola of Courier logistic” has opened its office and operations in Mumbai, India. There has been lot of awareness and increasing interest about India’s economic growth stories and interest to do business with India is on the rise. Let me give you an example to explain this. I represent a leading Indian ferro alloys producer in Russia. Russian steel companies import large volumes of special ferro alloys used in steel making from Georgia, Ukraine and Europe apart from buying from domestic companies because of freight and logistic benefits which make importing costlier from India. But with sanctions on some Russian companies like “Rusal” and overall problems with Europe and Ukraine, I have recently started getting serious business enquiries for the same from Russian steel companies as Russian companies look for alternatives. There was a big international Ferro alloys conference in New Delhi during 1^st week of September,2018 and for the first time it was attended by major Russian steel producers like Evraz, NLMK, etc.

Indian companies have also made big investment in recent times in oil and gas sector in Russia. ONGC, IOC and BPCL have invested more than US$ 2.5 bn for buying stake in oil and gas fields in Far East and Siberia. In the recently concluded bilateral summit between Russia and India, President Putin invited India for making investment in exploration and development of new oil and gas fields in Arctic and Barents sea region and also India will build a space monitoring station in Siberia.

There are huge opportunities for India as we need high end and cost effective technologies which Russia can offer. So Indian private firms can explore Russian technologies in field of railways, transportation, agriculture, construction and infrastructure, etc. But Indian private firms are still suffering from negative image of Russia shaped by western media which is refraining them from taking initiative. This negative image gets boosted by some Indians and Indian firms based in Russia with vested interest who falsely claim that it is difficult to do business in Russia without them as its still ruled by mafias. This is totally wrong and Indians should visit and research and see that Russia is open economy with few regulations and it is much easier to start a company in Russia and do business in Russia as compared to India.

I would like to conclude with my suggestions to boost business to business trade and investment between India and Russia. We know that banking and finance is the most important aspect of international trade. Therein lies the problem between Indian and Russian side. Russian banking system is different from western and Indian banking system. Most Indian firms work with LC (Letter of Credit) which is kind of Bank guarantee provided for buying and selling on credit. But Russian firms don’t know about LC and also unwilling to pay through LC as it adds to the cost. So Russian firms should be educated and nudged to do business through LC as it is safe and internationally accepted way of payment. Also more Indian banks should start operations in Russia or open Russian desk. Similarly, Russian banks also should open Indian desk specially to facilitate trade and business with India. More banks coming in the play will also bring down the cost of financing and LC.